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FRAUDULENT PREFERENCES AND TRANSFERS 

Insolvency

TRANSFER

     Includes  the  sale  and  every  other  and  different  modes  of disposing of or parting with property, or the possession of property,   absolutely   or   conditionally,   as   a   payment, pledge, mortgage, gift, or security 
 

WHEN PREFERENTIAL TRANSFER EXISTS

     It  is  a  parting  with  the  property  of  the  insolvent  for  the benefit of a creditor with the result that the estate of the insolvent is diminished and other creditors are prejudiced. 
 

WHEN FRAUDULENT PREFERENCE EXISTS

It  is  a  disposition  of  property  by  the  debtor  under  the  following conditions: 
1.   He is insolvent or is in contemplation of insolvency; 
2.   The transaction is made within 30 days before the filing of the petition for insolvency; 
3.   It is made with a view to giving preference to any creditor; 
4.   The person receiving  a  benefit  has reason to  believe that the  debtor  is  insolvent  and  that  the  transfer  is  made  in order to defeat or prejudice the rights of other creditors.
 

WHEN FRAUDULENT TRANSFER EXISTS

     It  is  any  disposition  of  property  made  by  the  insolvent within  one  month  before  the  filing  of  the  petition  for insolvency, except for valuable consideration in good faith. 

 

EFFECT OF FRAUDULENT TRANSFER

1.   If  made  within  30  days  before  the  filing  of  insolvency proceedings, the transfer is void. 
2.   If  made  after  the  filing  of  insolvency  proceedings,  it  is rescissible for being in fraud of creditors.  
3.   Another  remedy  of  the  creditors  is  to  file  a  criminal complaint against the insolvent debtor. 

IS THERE A PRESUMPTION OF FRAUD? 

THERE IS A REBUTTABLE PRESUMPTION THAT A CONVEYANCE IS FRAUDULENT WHEN: 
1.   It is not made in the usual and ordinary cause of business of the debtor; or 
2.   It is made under a confession of judgment.

FRAUDULENT PREFERENCES AND TRANSFERS- Act 1956

SECTION   70.      If   any   debtor,   being   insolvent,   or   in contemplation  of  insolvency,  within  thirty  days  before  the filing of a petition by or against him, with a view to giving a
preference to any creditor or person having a claim against him or who is under any liability for him, procures any part of  his  property  to  be  attached,  sequestered,  or  seized  on execution,   or   makes   any   payment,   pledge,   mortgage, assignment, transfer, sale, or conveyance of any part of his property,   either   directly   or   indirectly,   absolutely   or conditionally,   to   anyone,   the   person   receiving   such payment,  pledge,  mortgage,  assignment,  transfer,  sale,  or conveyance,   or   to   be   benefited   thereby,   or   by   such
attachment  or  seizure,  having  reasonable  cause  to  believe that  such  debtor  is  insolvent,  and  that  such  attachment, sequestration,    seizure,    payment,    pledge,    mortgage, conveyance,  transfer,  sale,  or  assignment  is  made  with  a view to prevent his property from coming to his assignee in insolvency,  or  to  prevent  the  same  from  being  distributed
ratably among his creditors, or to defeat the object of, or in any  way  hinder,  impede,  or  delay  the  operation  of  or  to evade  any  of  the  provisions  of  this  Act,  such  attachment,
sequestration,    seizure,    payment,    pledge,    mortgage, transfer,  sale,  assignment,  or  conveyance  is  void,  and  the assignee, or the receiver, may recover the property, or the
value  thereof,  as  assets  of  such  insolvent  debtor.  If  such payment, pledge,  mortgage, conveyance, sale,  assignment, or transfer is not made in the usual and ordinary course of
business  of  the  debtor,  or  if  such  seizure  is  made  under  a judgment  which  the  debtor  has  confessed  or  offered  to allow, that fact shall be prima facie evidence of fraud. Any
payment, pledge,  mortgage, conveyance, sale,  assignment, or  transfer of property  of  whatever character  made by the insolvent within one month before the filing of a petition in
insolvency   by   or   against   him,   except   for   a   valuable pecuniary  consideration  made  in  good  faith,  shall  be  void. All  assignments,  transfers,  conveyances,   mortgages,   or
encumbrances  of  real  estate  shall  be  deemed,  under  this section,  to  have  been  made  at  the  time  the  instrument conveying or affecting such realty was filed for record in the
office of the register of deeds of the province or city where the same is situated.